The Enlightened Consumer
Natty Hoffman is a finance geek and has tracked all of her financial transactions over the past 14 years. She worked as a consultant for several large companies helping them track their financial data and budget their expenses and she wanted to implement these tools to her own personal finances. In this talk, she discusses her experiment in trying to do better personally on her finances.
So as I was preparing for this meeting I was asking myself you know why are we all in this room anyway, and I think it’s because we want to ultimately make better decisions for our life. And one of the ways we can really track ourselves and figure out how we make decisions is the way we track our spending.
But what do we really know about how we consume things and how we are as consumers. I think that’s a very interesting question and I want to tell you a little bit about my experiment in trying to do that and learning more about myself.
So I’m a finance geek. I studied finance. I also got an MBA and I worked as a consultant for several large companies helping them track their financial data and helping them with their spending. And that in turn got me interested and how do I do that better for myself personally.
What’s coming up next, I’m going back to school to study data visualization at North Eastern and I also have a little football here, so we’ll be having a baby and we’re very excited about those two things.
So what did I actually track and why. I essentially tracked all of my financial transactions over the past 14 years, and I did that for a fairly simple reason. I travelled a lot as a consultant and I needed to get reimbursed for all my business expenses. I also wanted to make sure that I was on top of my budget.
What I essentially did is I used good old Excel. I dumped all my data into it, categorized, reconciled all the transactions and combined them into an income statement that I looked at every month.
And I didn’t really think much about this data until I went to a Quantified Self meeting a few months ago and then I said to myself, you know I have some pretty interesting data about myself as a consumer and I wonder what I’m going to find out more, so I was curious to find that out.
So what I did was I actually took a look at the past two years, during which I lived in a small apartment on Beacon Hill. The reason I did that was because when we moved our shopping tends to really change, so I wanted to make sure I had a consistent time period. So I took a look at all of those transactions and classified them into four big sections.
The first two are things I didn’t really control day to day, things like my salary and my fixed expenses like rent. Then the third and the fourth section were expenses that I control a little more. So semi-fixed expenses, things like groceries or health that I needed to make but I had some control over. And discretionary, things that I didn’t have to spend money at all but I chose to spend them.
And so the next thing I did was I also tracked what businesses I spent money in and I actually found out that I spend my money on no less than 365 businesses over the past two years. And I would like for you to think for a second about how many businesses do you think you spend your money with over the past year, and you’ll probably find it’s a lot if you have that data. And if you look at it, it’s enough to make any consumer very frustrated, because how are we supposed to you know track all of these and figure out if we’re making good decisions for ourselves.
So I asked myself, well how much money did I spend on each one, and I realized that half the money went to only 13. So 28% of my spending money went on rent, the next 22% I spent on the top 12 businesses and so on. And there were a number of transactions and cash that I couldn’t track back to a business, so 15% of the money was unknown.
So then I asked myself, okay, what are those top 12 businesses, I’d like to know. So here they are. They are divided into categories. If you asked me and I could give them to you off the top of my head I’d say probably two or three. So this was kind of interesting for me to look at. And I asked myself these four questions, and supporting these, how did I do as a consumer.
I thought these questions were pretty straightforward you know and tried to answer them, but I realised the answers were a lot more complicated than I thought. And the first question is are they ethical and I actually used as an example CVS Pharmacy. So I investigated CVS a little bit and I found out that CVS actually has a very mixed record when it comes to you know being ethical and especially being in the pharmacy division, but I realized that I rarely shopped there. I actually mostly shop for household products at CVS.
And when I thought about it more what I realized is that I was more concerned about the products that I bought. I bought a lot of products with a lot of plastic, products with a lot of ingredients that i really didn’t know much about. So I ended up worrying more about the kinds of products that I bought as opposed to shopping a the company, CVS, but I didn’t have that data, because all I had was just one big number. I didn’t have the listing of all the products.
The next question I asked myself was am I supporting small businesses and is that a good thing to do? So I actually used my dentist’s office as an example to try and look into that. I had unfortunately had to have a tooth taken out, so I spent a lot of time at Gentle Dental.
Gentle Dental is a big company and I was wondering, should I have spent that money with a small local office instead. And the answer is not necessarily. Dentists are better off in big corporations because they have better negotiating power when it comes to both insurance companies and suppliers, so they’re able to get paid better and also give the consumer better services for less money.
So I was like, well in that case I was actually okay with using a larger business and getting better service from them.
The next question that I asked was actually about my commute, am I commuting habits healthy? So here, you can take a look at my spending on transportation. I realized that I spent a lot of money on car rental, but I knew myself that my commute was basically, mostly the vast majority through the subway or walking.
The problem with this is that when you walk somewhere it’s free, but when you rent a car it’s very expensive. So this was a situation where my spending you know picture didn’t actually fit reality, so it didn’t fit the reality of what I was actually doing and how I was behaving.
Did I always have a choice in terms of the companies that I spent my money on? The answer was yes, mostly yes but sometimes those choices were either limited or not very convenient to make, so kind of not a perfect situation.
I created a little scorecard for myself in terms of how I did, and I do have a few action items, so I got rid of my cable package. I thought I was spending too much money and time watching TV, and I could probably spend that going to the local theater or doing something better with that money.
I would also like to buy cleaner products, understand the ingredients in the products that i buy, and definitely consume less plastics, so those are the things I want to work on.
In terms of my recommendations for you guys, financial data doesn’t reveal everything. It does tell you somethings but not always. As a consumer what you want to try to do is maybe make just a couple of changes at a time nd make sure that those changes are realistic.
And in order you to do that I’ve posted a few of my favorite consumer apps. On my Twitter feed I actually have a little description on each one of them, so you’re welcomed to check that out.
Thanks for listening to me and I’ll be happy to take questions.